The spirit of checks and balances

In a poor country where even the legitimate demands and aspirations of its citizenry far outweigh the available resources the importance of judicious use of these resources becomes a critical component of the national agenda. As a consequence, the role of the Auditor General’s office (AGPR) and Public Accounts Committee also acquires a new meaning and definition in relation to a high-level of oversight to plug waste and keep an eye on the real or perceived misuse of public funds.The audit of expenditure and receipts on a timely basis ensures the recovery of public funds as the person responsible is still at his post and is even helpful in correcting short collection of revenue assessments. Detection of misuse of public trust through audit observations – in a report to the Public Accounts Committee – brings about an effective mechanism of checks and balances in both expenditure and revenue and contributes towards efforts aimed at improving the system.

It is heartening to note that the office of Auditor General of Pakistan has been able to recover Rs 19 billion in 2007-08, Rs 23 billion in 2008-09; and Rs 58 billion in 2009-10. These figures indicate a positive improvement and the credit goes to the Auditor General and his team of dedicated officers. At the same time, the PPP-led government has to be credited for placing the PAC under the leadership of Leader of the Opposition. For further improvement and strengthening of the PAC, the legislature needs to provide it a legal cover by providing it a quasi-legal force and the AGPR needs to clear all pending reports in arrears.

The private corporate sector is legally bound to adhere to time limits as enunciated in the Company Law. A similar kind of legal requirement is also needed for government divisions/departments to strictly follow a proper timeline for their accounts closing, audit and submission. Fixing of timelines also means the principal accounting officer has to provide a certified copy of accounts of his division/department within six months of closure of the financial year. The AGPR too should be required to submit to PAC audited account within eight months of account closure. While beefing up the AGPR to provide timely and quality reports, the Public Accounts Committee also needs to function in a non-partisan manner. The Executive branch must provide total support to PAC by correcting its observations and punishing those who fall afoul on PAC enforcement orders.

The auditors’ role involves both pre- and post-expenditure monitoring. Prior to expenditure, the auditor has to see whether the expenditure required is supported by all the necessary approvals and is well within the approved budget. Obviously, supplementary expenditure can be sought to meet emergency needs and such supplementary expenditure should be for exceptional or unforeseen needs and not the norm or a routine practice. Unfortunately, however, over the years, supplementary grants have become the norm as these are no longer exceptions.Rules of business delegate the expenditure authority to the principal accounting officer, ie, the secretary in charge of the division or ministry. However, there is a Financial Advisor (FA) deputed in every division by the Ministry of Finance, who is functionally under the Finance Secretary. The main purpose of financial advisor is to assist the Finance Secretary in planning and arrangement of government’s financial affairs.

The government starts every year with a deficit instead of a surplus. And, as agreed with the International Monetary Fund, the fiscal deficit has to be brought down to an agreed level at the end of each quarter in accordance with the Fund’s stabilisation programme.As the government has undertaken to pursue this objective religiously, the Financial Advisor becomes a handy tool for the Finance Secretary, who is forced to constantly engage in manipulation to keep the monthly cash flow within limit. As a consequence, the FA often impedes even approved expenditure, causing delays and costly overruns in the government.

The civil service reform agenda has proposed to do away with the Financial Advisor’s Office (FAO); instead, it has advocated the placement of a CFAO, who is under the Principal Accounting Officer or Secretary of the division. This would allow timely release of expenditures under a consultative process between the secretary of the division and the CFAO as long as it is in accordance with the budgetary approval of Parliament.

Unfortunately, only in a few cases CFAOs have been placed in ministries/divisions. This reform unfortunately has not made much headway due to unstructured approach without a proper roadmap. This is one area which needs urgent attention for improving governance and reducing costly overruns leading to supplementary budgets/grants on a routine basis. – Brecorder